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June 22, 1990


The opinion of the court was delivered by: Tenney, District Judge



Senape has been enrolled since 1979 as a medical provider in the Medicaid program, a joint effort by the federal and state governments to provide medical assistance for indigent people. DSS is the body statutorily authorized to administer and oversee the Medicaid program in New York. See N.Y. Social Services Law § 363-a (McKinney 1983). One of the responsibilities of DSS is to screen and evaluate physician-applicants for enrollment as providers of medical services in the program.*fn1 DSS also determines whether the participation of providers accepted into the program should be modified or terminated for any reason. Prior to January of 1987, DSS could terminate the participation of a physician who had been accepted into the program only upon a specific finding that the physician had failed to comply with the department's regulations. In 1987, in order to improve its oversight functions, DSS modified its procedures by implementing a requirement for all currently enrolled providers to re-enroll periodically in the program. See N.Y. Comp.Codes R. & Regs. ("NYCRR") tit. 18 Part 504.10 (1988). Although DSS retains the authority to terminate a provider for cause, the new regulations in effect allow DSS, at its option, to invert the process. Instead of investigating each provider for deficiencies and terminating those found inadequate, DSS may require all providers to re-enroll en masse in the program and then choose whom it wishes to renew.

In October of 1987, Senape received a form letter that was sent on a predetermined schedule to all providers, informing him that pursuant to the new DSS regulations, he would have to submit a re-enrollment application within sixty days. Senape submitted the re-enrollment forms as required. In November of 1987, presumably as part of the evaluation process for Senape's re-enrollment request, DSS investigators visited Senape's office and received the records of ten patients for evaluation.

DSS informed Senape on March 8, 1988, that it had found various violations of DSS regulations during its review of the patient records, and had decided to terminate him immediately from the program. DSS based its action on Part 515 of the regulations, which, as more fully explained below, permits DSS to suspend a provider immediately if it determines that the health or welfare of the public or a recipient would be imminently endangered by a provider's continued participation. Pursuant to the procedures specified in the regulations, Senape submitted various documents to DSS contesting its ruling under Part 515. See 18 N.Y.CRR Part 515.6(a)(2). One week later, on March 15, DSS informed Senape that based on the review of the ten patient charts, it had also decided not to re-enroll him in the program pursuant to the new re-enrollment procedures set forth in Part 504. DSS informed plaintiff that he could submit a written appeal to its Part 504 determination, which he did.

On April 18, 1988, DSS informed Senape that it had considered his Part 515 appeal and decided to reverse its decision to terminate his participation immediately, but stated that the appeal of his re-enrollment denial under Part 504 was still pending. DSS informed plaintiff on July 29, 1988, that it had decided to deny his Part 504 appeal and that his participation in the program would be terminated effective August 12, 1988. Senape requested a departmental hearing during which he presumably hoped to present live testimony and cross-examine the DSS personnel who had reviewed the ten patient charts and decided not to re-enroll him in the Medicaid program. DSS refused his request.

Plaintiff brought the instant action on August 12, 1988, claiming that he has a constitutionally protected property interest in his continued participation in the Medicaid program which cannot be terminated without an evidentiary hearing. Judge Louis Stanton issued a temporary restraining order preventing DSS from taking any action that would affect Senape's participation in the program pending the outcome of this case. Defendants have now moved to dismiss the complaint claiming that Senape is not entitled to the evidentiary hearing he seeks.


A.  The Regulatory Scheme

In their current form, the regulations provide DSS a wide variety of mechanisms with which to deny participation in the program to a physician-provider, only some of which are implicated in this case.*fn2 DSS has virtually unlimited discretion to deny the initial enrollment of a provider-applicant, and the applicant has only a limited right to have that decision reviewed. See 18 N.Y.CRR Part 504.5(e)(1). Once a provider has been accepted into the program, the regulations allow DSS to sanction or terminate the provider for any one of a number of reasons. See id. Part 515.2. Since this procedure interrupts the term of a provider's continuing participation in the program, DSS has granted extensive rights to review and challenge such action. See id. Part 515.6. Finally, on those occasions when DSS elects to require the entire class of providers to re-enroll in the program, it may decline to re-enroll any provider. See id. Part 504.5. As explained below, DSS has the same degree of discretion in its decisions regarding re-enrollment as it has in decisions regarding initial enrollment. The question presented in this case is the scope of the procedural review process available when DSS declines to re-enroll a provider.

DSS claims that a provider is entitled only to the limited review applicable to initial enrollments. Senape claims that a denial of re-enrollment is more analogous to a sanction that interrupts a provider's continuing participation. He therefore argues that he is entitled to the extensive due process protection afforded providers terminated in those circumstances. Whether the failure of DSS to re-enroll a provider is more akin to the denial of an initial enrollment, or a sanction that occurs in the middle of a provider's period of participation, is a question that has been explored in many conflicting judicial decisions. Compare Barata v. Perales, 550 N YS.2d 642, 643 (App. Div. 1st Dep't 1990) (denial of re-enrollment equivalent to denial of initial enrollment) and Bezar v. New York State Dep't of Social Services, 151 A.D.2d 44, 48, 546 N.Y.S.2d 195, 197 (3d Dep't 1989) (same) with Nostrand Gates Pharmacy, Inc. v. Perales, 143 Misc.2d 464, 468, 541 N.Y.S.2d 169, 171 (Sup.Ct. 1989) (denial of re-enrollment equivalent to sanction interrupting continuing participation). As explained below, the court finds that a denial of a re-enrollment is equivalent under the regulations to a denial of an initial application, and that Senape is therefore not entitled to an evidentiary hearing.

1.  Initial Enrollments

The provisions for denial of an initial enrollment are codified in Part 504.5, "Denial of an application." DSS may consider a very broad range of factors in determining whether to enroll a doctor as a provider in the Medicaid program. See 18 N.Y.CRR Part 504.5(a). If DSS denies the application, it must send a written notice to the applicant specifying the reasons for the denial. Id. Part 504.5(b). The original set of regulations promulgated by DSS did not grant the applicant the right to challenge the department's denial of an enrollment, but DSS subsequently added a provision to Part 504.5 allowing the applicant to submit a written appeal. See id. Part 504.5(e). The regulations specifically deny the applicant any right to an evidentiary hearing to review the denial of an initial application. See id.

2.  Sanctions

Part 515 sets forth the provisions pursuant to which providers may be sanctioned during their participation in the program. Once the applicant is accepted into the program, DSS can generally impose sanctions only for specific reasons and after an evidentiary hearing. Id. Parts 515.2, 515.6. Possible sanctions include exclusion from the program for a reasonable period of time, censure, and conditional or limited participation. Id. Part 515.3. The provider may submit written documents within thirty days challenging the sanction and, if the sanction is upheld by DSS, may request an evidentiary hearing. Id. Part 515.6.

Part 515 also lists several instances in which DSS may sanction a provider without any notification period and without a hearing. These include circumstances in which DSS has determined that the public health is imminently endangered, and instances in which it has received notice that the provider has been indicted or convicted of a crime relating to the furnishing or billing of medical care. Id. Part 515.7. In such instances, DSS may suspend or exclude the ...

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